Oil futures: Brent tumbles another 4.5% on global recession fears
Quantum Commodity Intelligence - Crude oil futures dropped another 4.5% Wednesday extending losses after already falling 4% in the previous session, as dire warnings over the state of the global economy continued to drag on markets.
March ICE Brent futures were trading at $78.26/b (1920 GMT), compared to Tuesday's settle of $82.10/b, taking combined two-day losses to around $7.50/b.
At the same time, Feb23 NYMEX WTI was trading $73.32/b versus Tuesday's settle of $76.93/b and the pre-holiday price of $80.26/b.
Oil markets were left reeling after the International Monetary Fund (IMF) said over the holiday weekend that a third of the world could be heading for recession this year, warning "the three big economies, the US, EU and China, are all slowing down simultaneously."
In addition, analysts at insurer Allianz said the global economy was "headed towards a recession" in the coming months, predicting worldwide growth of just 1.4% for 2023, down from 2.9% last year, before rebounding to 2.8% in 2024.
Adding to worries is the rapid spread of Covid in China as the country rolls back its zero-tolerance policy, which is expected to stunt growth for at least the first quarter of 2023.
Beijing's Covid restrictions had put China out of step with the global post-pandemic rebound, so while recovery is anticipated later in the year, analysts predict a tough Q1.
China
Capital Economics expects China's economy to contract by 0.8% in the first quarter of 2023 before rebounding in the second quarter. In a recent research report, HSBC economists projected a 0.5% contraction in the first quarter but an overall 5% growth for 2023.
Meanwhile, more than a dozen countries, including Britain, Japan, South Korea and the US, have stepped up Covid-19 curbs on travellers from China.
EU member states were also considering coordinated controls on passengers arriving from China, including possible mandatory pre-travel testing.
The restrictions come as Beijing prepares to reopen its borders on 8 January, just over a month after lifting its zero-Covid policy.
Sentiment was also hit by exceptionally mild temperatures across Europe, sharply cutting gas burning, along with TTF prices, and reducing the likelihood of gas-to-oil switching.
But Commerzbank said on Tuesday that ICE Brent crude could be back to $100/b by the second quarter of this year as demand improves on economic recovery.
"As soon as there are signs of an economic recovery in the key economic areas, Brent is likely to climb back towards the $100 per barrel mark. In our opinion, this will probably happen roughly from the second quarter of this year onwards," Commerzbank said.
